With extortion-style ad sales, Yelp is barking up the wrong tree

By Susan Dyer Reynolds
May 2014

I co-host the Cooking with Ryan Scott show on KGO Radio (810 AM) Saturdays from 4 to 6 p.m., and whenever we have chefs on as guests, review website Yelp inevitably comes up, and usually not in a good way. A few weeks ago, Ryan and I decided to have Jon Akerman, Yelp San Francisco community manager/editor, and Vince Sollitto, Yelp vice president of corporate communications, on the show to get their side of the story.

Of course, they wanted to talk about all the great things Yelp can do for people. Akerman boasted that they raised $700 from Yelpers for charity the night before, which struck me as pathetic for a multimillion-dollar company, especially when the previous guest, 2009 Top Chef winner Hosea Rosenberg, said he had raised over a million bucks at an event for the Bonnie J. Addario Lung Cancer Foundation in one evening. Sollitto, in particular, wasn’t thrilled with my probing questions. When I told him that I personally knew of a restaurateur who had been solicited for advertising using the old “We can take care of those negative reviews” tactic, he bristled. “I don’t believe you,” he said on air. I assured him it was true. This isn’t a new accusation for Yelp, and, in fact, when we opened the phone lines, our callers corroborated it over and over, with tales of positive reviews disappearing and negative reviews appearing after turning Yelp down for advertising. Sollitto’s response was the same old Yelp broken record: “We use an algorithm and we have nothing to do with how, where, or which ads show up.” But the FTC has had more than 2,000 complaints, mostly about this very thing, between 2008 and March 4, 2014. “Are all of these people lying?” I asked Sollitto. “Are 2,000 people and all of our callers in collusion against Yelp?” He didn’t have an answer for that.

When I questioned Sollitto about the many lawsuits against Yelp, he said, “The lawsuits have all been dismissed for lack of evidence,” but that’s not true. In 2012, Joe Hadeed, owner of Hadeed Carpet Cleaning Inc. in Springfield, Va. sued seven reviewers for defamation, and demanded that Yelp give up their true identities. Hadeed told The Wall Street Journal that he is certain the reviews are fraudulent — possibly posted by competitors — because he was unable to match them to actual customers based on time, location, and sales data (one review, for example, came from Haddonfield, N.J., where the company doesn’t do business). Yelp is screaming “freedom of speech,” of course, but so far both the Alexandria Circuit Court and the Virginia Court of Appeals have sided with Hadeed, holding Yelp in contempt for not turning over the names. Yelp appealed to the state supreme court, arguing that the reviews are protected under the First Amendment; the court could issue an order granting or denying Yelp’s appeal, or schedule a hearing in Richmond, which could take place in the next 90 to 120 days. As a journalist, I am obviously a strong supporter of the First Amendment; however, I don’t believe it gives anonymous trolls carte blanche to say anything they want and scurry back to their mother’s basement, particularly when their claims severely impair a company. In Hadeed’s case, he says that following the rash of negative Yelp reviews his business sank 30 percent, forcing him to sell six trucks and lay off 80 workers.

Yelp, which says it receives about six subpoenas monthly, many seeking the names of anonymous users for litigation, is between a rock and a hard place — as a public company they’re under tremendous pressure from shareholders and analysts to produce high growth and big revenue. With the recent sell-off in social media stocks, they’re under even more pressure — especially because, after a decade of doing business, Yelp has yet to turn a profit. Yelp, like most dot-coms, is almost 100 percent dependent on advertising, and that makes their business model a little slimy: A company with positive reviews has no incentive to spend money on Yelp, but a company with negative reviews may feel they have to spend to survive. For Yelp to claim they don’t use extortion-like ad sales tactics is not only disingenuous, it’s downright near impossible. What other gambling chip do they have besides the “We can take care of those negative reviews” sales pitch?

And it appears Yelp has come up with another arm-twisting vehicle: warning businesses that competitors’ ads will appear with their listings. Sollitto defended this practice to me on KGO as well as to the Los Angeles Times, saying that Yelp was offering businesses the chance to buy out the ad space accompanying their reviews. But the Los Angeles Times quoted Rick Fonger, the owner of an Alhambra jeweler, who says that after he canceled his Yelp ad, he got one of those calls. “She said that for $75 a month, she could make those ads go away,” Fonger told columnist David Lazarus. While Yelp’s tactics are legal, Lazarus, a regular critic of the site, says they feel “nefarious” and “fishy.” I agree with him, but with all that pressure to produce a profit, Yelp is likely to keep pushing the envelope on the legality of what they do, and eventually, someone is bound to bite back.